Vacancy Rates, Rent Growth, Construction Moving on Up

Apartment vacancy rates nationally stood at 4.8%, while the national average asking rent grew by 4.4% year over year, according to Reis’ preliminary Apartment Trends report for Q2 2018. The analysts for the New York research firm indicated that the vacancy rate increased 70 basis points from a low of 4.1% in Q3 2016.
Net absorption was 37,265 units, slightly above Q1 2018’s 36,124 units, but is trending below the average quarterly absorption in 2017 of 46,031 units. Construction, in the meantime, stood at 50,360 units, which topped the previous quarter’s 50,244 units.

Both Reis and rival research company Yardi Matrix anticipate that total apartment unit construction for 2018 will surpass that of 2017. Analysts with both companies point out that healthy job growth is supporting continuing demand for apartments, with the U.S. adding an average of 207,000 jobs per month in the first five months of the year.

Another reason? Fewer single-family home sales. “These shifts are likely due to the Tax Reform and Jobs Act that doubled the standard deduction, and cut the deductibility of state, local and property taxes, which lowered the incentive to buy a home,” Reis analysts concluded.

Yardi Matrix analysts are concurring with the assessment, pointing out that, in large, expensive metropolitan areas, some people won’t be able to afford a house, especially in high-tax states and metros. The Yardi researchers believe that this will lead to population shifts to “less expensive locales, especially among first-time buyers and empty next homeowners with high property taxes.”

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